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Inflation Expectations as an Indicator of Future Inflation in Bulgaria

Author

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  • Todor Borisov

    (University of National and World Economy, Sofia, Bulgaria)

Abstract

This article examines the relationship between household inflation expectations and inflation in Bulgaria. Inflation expectations represent an important element in the formation of price dynamics, as they reflect households’ perceptions regarding future changes in the price level and may contain valuable information about the future development of inflation. The empirical analysis is based on quarterly data on consumers’ inflation expectations for the next twelve months, obtained from the consumer survey conducted by the National Statistical Institute of Bulgaria, as well as data on actual inflation measured by the Harmonised Index of Consumer Prices (HICP). Inflation is represented by quarterly averages of the monthly year-on-year rate of change of the index relative to the same month of the previous year. To examine the relationship between inflation expectations and inflation, time-series econometric methods are applied, including VAR/VECM, ARDL and ARIMAX models. These models allow the analysis of both short-term and long-term relationships between the variables and provide an assessment of the informational content of inflation expectations regarding the future dynamics of inflation.

Suggested Citation

  • Todor Borisov, 2026. "Inflation Expectations as an Indicator of Future Inflation in Bulgaria," Ikonomiceski i Sotsialni Alternativi, University of National and World Economy, Sofia, Bulgaria, issue 2, pages 54-72, July.
    • Handle: RePEc:nwe:iisabg:y:2026:i:2:p:54-72
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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